Enron: The Smartest Guys in the Room
Alex Gibney (2005)
The subject of this documentary is the historic Enron collapse in September 2001.
The Enron scandal occurred prior to the blossoming of social media, and the corporate media deliberately minimized the criminal behavior that led to the collapse of the world’s largest energy company. They blamed Enron’s demise on “bookkeeping irregularities.” This film tells a very different story.
When Enron, which was founded in 1985, went bankrupt it was the largest corporate bankruptcy in history. Its late founder, Ken Lay, was close personal friends with Bush senior, who engineered millions in federal subsidies to help launch the company. Lay subsequently donated heavily to Bush junior’s presidential campaign.
Trading Energy Like Financial Derivatives
A big proponent of corporate deregulation, Lay teamed up with Jeff Skilling in 1990 to transform energy production and delivery (natural gas and electricity) into financial instruments that could be traded like derivatives.
To manipulate their stock prices, Enron employed two novel (and illegal) bookkeeping practices. With the first, mark-to-market accounting, they recorded potential future profits as real time revenue. The second accounting scam involved creating hundreds of “subsidiaries” to hide $30 billion of Enron debt from investors and regulators. Each subsidiary was personally managed by Enron Chief Financial Officer Andy Fastow, who pocketed $45 million from one deeply indebted subsidiary.
These devious accounting schemes allowed Enron to conceal that their company was losing millions of dollars a year. They kept the company afloat via $25 million bank loans from all the major Wall Street investment banks, using their overpriced stock as collateral.
Enron Bankrupts California
Prior to seeing this film I was vaguely aware that Enron was responsible for the California power crisis in 2000-2001 and the $38 billion deficit that led California governor Gray Davis to be recalled and replaced with Arnold Schwarzenegger. I had no idea of the criminal behavior behind the power crisis.
Enron’s purchase of Pacific Gas and Electric in the late nineties gave them total control of most of the state’s power generation and 26,000 miles of power lines. To drive up the cost of power, Enron’s unscrupulous energy traders caused rolling blackouts by “loaning” California power to other states and creating artificial shortages. They jacked the price of power even higher by deliberately shutting down regional power plants for “routine maintenance.” In this way, they succeeded in driving the cost of electricity from $30 per kilowatt to $1,000 per kilowatt.
Governor Davis declared a state of emergency while he pleaded with Bush junior and the Federal Energy Regulatory Commission (FERC) to impose a price cap on California electricity. By the time Congress forced FERC to implement a price cap, California was $38 billion in the hole and the Terminator was the new California governor.
Management Screws Enron Employees
Even more scandalous was the decision by Enron management to freeze trading by employees as the stock price plummeted. This enabled all the top executives to dump their stock while 29,000 employees had their pension plans wiped out.
Andy Fastow pleaded guilty to fraud and embezzlement charges (receiving a $23 million fine and 10 years in jail) in return for testifying against Skilling and Lay.
Skilling would receive a 14 year sentence for insider trading. Ken Lay was also convicted of insider trading but died of a heart attack (2006) prior to sentencing.
I CONGRATULATE YOU IN CALLING THEM BASTARDS. THERE ARE A MANY SONS OF A BITCHES AND BITCHES. GREED KNOWS NO BORDERS, PEOPLE MUST DISTINGUISH BETWEEN AMBITION AND GREED. AMBITION BUILDS THE SOUL AND CHARACTER TO DO FOR HIMSELF OR HERSELF AND OTHERS; GREED DOES EVERYTHING AND ANYTHING TO TEAR THE ACCOMPLISHMENT DOWN, AND BRING OTHERS DOWN WITH THEM.
Futuret, it’s my personal view that real happiness derives from social relationships, finding meaning in life and the opportunity to create objects and ideas of real value to other people. Modern society is nearly devoid of all these attributes. Unfortunately too many people chase after money and material objects to fill this voice – but it never does.
I JUST HAVE SOMETHING TO SAY: I LOVE YOU~~YES, WE ARE LIVING AND MATERIAL OBJECTS ARE NOT. KEEP YOUR CHIN UP, FOR AS LONG AS WE CAN READ AND WRITE.
The greed of humankind may well be the final undoing of our civilization.
Sad but true, Rosaliene.
Thanks for the glowing compliment, Futuret. Alas these ideas aren’t original to me. I got them from reading Charles Eisenstein’s Sacred Economics – see http://stuartjeannebramhall.com/2014/03/04/sacred-economics-life-after-capitalism/
This was a pretty stunning documentary. I lived in San Francisco when all of that occurred (and I’d been there for quite awhile before, so I was very aware of the changes and damage it wrought). At the time, no on believed what was happening. It all came out afterwards of course. It was quite awhile before I could watch Enron: The Smartest Guys in the Room, because I’d seen the wreckage first-hand and knew so many people who were affected by it … years of work, years of saving down the drain for many.
A couple of other good documentaries for a marathon with this one would include Client 9 and Inside Job. Perhaps Chasing Madoff. Seen together, these really, really show a theme, and reveal a repeating story.
Thanks for sharing word of this one. It’s still well worth seeing, since we’re still seeing these sorts of things blatantly happening.
THE “BEST” IS YET TO COME FROM A DIFFERENT SECTOR:
Sophiaschildren – I’m sure glad I didn’t live in California when Enron came down. Client 9 and Inside Job are also excellent suggestions. I don’t think I’ve seen Chasing Madoff yet. I’ll check it out.
I agree it’s incredibly important for people not to forget the history of our corrupt financial industry – without this context it’s extremely difficult to appreciate how corrupt our government has become.
“Enron’s purchase of Pacific Gas and Electric in the late nineties gave them total control of most of the state’s power generation and 26,000 miles of power lines.”
I was just sharing with a friend that I and my peers were fed the lie, in Am. history classes, that Teddy Roosevelt was “the trust buster,” and that monopolies/trusts would never be tolerated by this government/economic system.
And yet less than twenty years later, Ronnie Reagan would start the privatization, and subsequent monopolies, of what we referred to as utilities, with the divestiture of AT&T and the “baby bells”.
Today, there is nothing but monopolies, and so no competition. Thus the reason for prices continually rising while the products and services go straight to hell.
I still remember the recordings of Enron scum laughing and mocking older employees who were calling in to beg for help with their pensions. They should have been hung in the town square!
It’s all lies, sojourner, starting with the lie that the US is a democracy. The US Constitution, which was written by a secret cabal, was established to protect a tiny wealthy elite from the “tyranny of the majority.” The only way the elite manages to stay in power is by constantly bombarding us with mind-bending propaganda.
LikeLiked by 1 person
Yes, the constitution is nothing but a con on the people and was from its secret and closed inception.
You’re so right, everything in this country is based on a lie. And yet many alternative writers I read still hold to this government and its worthless documents as though they are sacred items that have been tainted and can fixed.
This is beyond me. How broken does this system have to be before people will finally realize it will never be fixed, because it is destined, as it evidently always has been, to be destroyed by the inbred ancestors of its founders. And “we the people” will be destroyed right along with it, if we allow ourselves to be.
Reblogged this on OCCUPY AMERICA.
Pingback: The Greedy Bastards Who Gave Us Enron (and Bankrupted California), Film and Review | Talesfromthelou
Pingback: The Greedy Bastards Who Gave Us Enron (and Bankrupted California) | ihtis69
Pingback: Hidden History: The War on Terror | The Most Revolutionary Act